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Rating Action:

Moody's assigns Baa3(hyb) to China Everbright Limited's proposed senior perpetual notes

16 Oct 2020

Hong Kong, October 16, 2020 -- Moody's Investors Service has assigned a Baa3(hyb) foreign currency rating to the USD-denominated senior unsecured perpetual notes to be issued by China Everbright Limited (Baa3 stable).

RATINGS RATIONALE

The Baa3(hyb) senior unsecured rating is on par with China Everbright Limited's Baa3 long-term issuer ratings, reflecting the proposed bonds' seniority in the issuer's liability structure.

The perpetual notes constitute direct, unsubordinated, unconditional and unsecured obligation of China Everbright Limited and shall at all times rank pari passu and at least equally with all China Everbright Limited's other present and future unsecured, unconditional and unsubordinated obligations.

The rating also reflects the features of the senior perpetual securities which will have optional and cumulative deferral, dividend payout restrictions in the case of deferral and increase on distribution rate in case of change of control, a breach of covenant event and a relevant indebtedness default event.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING

What could change the rating -- up

Since the note rating is on par with the company's issuer ratings, an upgrade of China Everbright Limited's issuer ratings would result in an upgrade of the note rating.

China Everbright Limited's issuer ratings could be upgraded if its standalone assessment improves. Its standalone assessment could be raised if the company (1) reduces its leverage materially and maintains debt-to-Moody's adjusted EBITDA below 7.5x, (2) maintains the resilience of its assets under management while improving its geographic and product diversification, and (3) restores its pre-tax income margin from the weakened level in 1H 2020, this maintaining its track record of robust profitability, with a healthy pre-tax income margin and stable revenue growth.

What could change the rating -- down

Since the note rating is on par with the company's issuer ratings, a downgrade of China Everbright Limited's issuer ratings would also lead to a downgrade of the note rating.

China Everbright Limited's issuer ratings could be downgraded if Moody's lowers its assumption of support from the group, or if the ratings of China Everbright Bank are downgraded.

China Everbright Limited's issuer ratings could also be downgraded if its standalone assessment deteriorates materially. Its standalone assessment could be lowered if (1) the company's scale and franchise erode in China's alternative asset management sector, resulting in significantly weaker resilience of its assets under management, (2) its profitability deteriorates, which could be the result of lower revenue, investment losses and/or higher volatility in investment performance with pre-tax income margin narrows to below 15%, or (3) debt-to-Moody's adjusted EBITDA sustains above 9.0x.

The principal methodology used in this rating was Asset Managers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186105. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Hong Kong, China Everbright Limited reported assets of HKD85.4 billion as of the end of June 2020.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Moody's considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody's. Unless noted in the Regulatory Disclosures as a Non-Participating Entity, the rated entity is participating and the rated entity or its agent(s) generally provides Moody's with information for the purposes of its ratings process. Please refer to www.moodys.com for the Regulatory Disclosures for each credit rating action under the ratings tab on the issuer/entity page and for details of Moody's Policy for Designating Non-Participating Rated Entities.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

The first name below is the lead rating analyst for this Credit Rating and the last name below is the person primarily responsible for approving this Credit Rating.

Lan Wang, CFA
Analyst
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Yat Man Sally Yim, CFA
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
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